The Scuttlebutt On Financing A Franchise In Canada . Buying Franchises Requires The Right Type Of Loan

Looking for some good Scuttlebutt on franchise financing in Canada? And who doesnt love the word ' SCUTTLEBUTT ' - It was the drinking fountain on ships... sailors hung around and shared rumors and gossip, ie Scuttlebutt!

While we are big fans of the term itself what’s more important is to dispel rumors and gossip around the reality of getting a franchise loan in Canada. The one thing we can assure clients is they need a solid business plan and financing package prior to starting the financing process.

While a lot of that information might come from your franchisor you’re basically preparing a financial overview of your new business. And from the lenders perspective they simply want to know how loans they make to franchises will be repaid. Fair enough, right!?

So what amount of funding is in fact required to purchase a franchise in Canada? There are several components to the project - they include the franchise fee, working capital, a loan for leaseholds and equipment or rolling stock, etc.

While all banks in Canada seem to have a lot of content on their websites about financing franchises directly the reality is that this is rarely done on the strength of your proposal alone. So when considering approaching a bank , either alone or with an experienced advisor you might just find that really only two avenues of success for your franchise loan :

External collateral

The Government SBL Loan

While the franchisee certainly has a right to offer up personal collateral, i.e. homes, savings, etc that is not the optimal way to finance a business. That is why thousands of business owners over the years have chosen the Government BIL loan to facilitate the financing of their new business. For financing needs fewer than 350k it’s a solid mechanism for getting you to the franchise goal line!

While specialty franchise financing does in fact exist in Canada it typically requires your franchisor to be part of a larger program which might not necessarily be the case. Oh and by the way lots of third party commercial finance firms such as equipment finance companies can also assist you in portions of your financing.

If we had to summarize a short road map of success in franchise loans in Canada it would be pretty simple:

Have a strong business plan / loan package

Be prepared to demonstrate good personal credit history and business experience

Be able t demonstrate that you can come up with a solid portion of equity in the business - no one is going to finance 100% of the project.

So, if you want to plough through all the scuttlebutt around a franchise financing loan in Canada seek out and speak to a trusted, credible and experienced Canadian business financing advisor.

Stan Prokop is the founder of 7 Park Avenue Financial . The firm specializes in business financing for Canadian companies in the areas of working capital , asset based lending, SR & ED tax credit financing, equipment financing, franchise financing and banking .